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tv   Nightly Business Report  PBS  June 6, 2012 7:00pm-7:30pm EDT

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>> this is n.b.r. >> tom: good evening. i'm tom hudson. susie gharib is off this week. stocks surge as central bankers in europe and the u.s. calm investor worries about the economy. buyers took charge, the dow industrials jump 286 points, its best one-day gain this year. and the nasdaq unveils plans to fix the bungled facebook trades. that and more tonight on "n.b.r." stocks saw their biggest gains of the year thanks to signs more help for the economy could be coming. the dow surged 286 points, back in positive territory for the year. the nasdaq jumped 66 and the s&p added 29. suzanne pratt looks at how the u.s. and european central banks fueled today's buying.
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>> reporter: here's what u.s. interest rates look like today. incredibly, the stock market would like the federal reserve to push them lower. the atlanta fed president fueled those hopes today when he said: those actions include the fed's so called operation twist. >> this program which is scheduled to expire this month will probably be extended and or they might actually twist the twist to use the expression traders are using which would be we take operation twist and twist it away from treasuries and toward mortgages. >> reporter: across the pond, the european central bank opted not to lower rates, even though at 1% they're higher than the u.s. still, e.c.b. president mario draghi said some bank members had wanted a cut, leaving the door open for it to happen soon. the e.c.b. is under pressure to lower rates and add liquidity
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support for sick banks. but, draghi wants european governments to first do something substantial about greece and spain. >> when you think about the state of the u.s. economy, the state of the u.s. banks, and the state of the u.s. debt markets compared to those in europe, you would think that europe would have an easier monetary policy than the u.s. and it's the other way around. >> reporter: tomorrow, u.s. fed chairman ben bernanke appears before congress. markets hope he'll give some hints about what happens next with u.s. rates. suzanne pratt, "n.b.r.," new york. >> reporter: i'm darren gersh. still ahead, jobs and the presidential election in the key swing state of virginia. "nightly business report" is brought to you by:
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captioning sponsored by wpbt >> tom: as investors shrugged off worries about europe's economy, they got better news on the u.s. economy. the federal reserve's beige book survey of regional economies painted a more upbeat picture, saying overall the u.s. economy is still expanding at a moderate pace. the report shows manufacturing expanding among most of the fed's 12 regions, between early april and mid-may. travel and tourism were also strengthening, the housing market continues to show signs of recovery, and the services sector was seen as stable to slightly stronger since the previous report. >> tom: david zier is with us in washington. david how are investors supposed to approach all this volatility in worries of volatility and hopefulness, especially when it comes out of europe? >> i think this is actually a great both long-term and short-term entry point in the equity markets. equity marketss are under valued here, think about just the u.s., the u.s. is trading
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about 13 times earnings historically traded like 15 times earnings. so you could say it's under valued. emerging market equities are more under valued, trading about 11 times earnings and historically traded 14 times earnings. international markets developed europe is eke actually under valued. so people should look at this as a great buying opportunity both short-term and long-term. >> tom: you have to have optimism to be a share holder in the best of days, but you're assuming earnings power will continue to grow. what makes you so certain given the head winds in europe, and the meager job broth we've seen? >> you just look at valuations, corporations are making money, they're doing very very well, there's no reason to believe that their earnings aren't going to continue to grow. and coupled with that, i think we're probably in the midst of, in the next month or so, looking at another injection of stimulus from the fed and maybe organized approach from all the central banks around the world. so that in itself is going to
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lift all equity prices, as well as gold and commodities. >> tom: we saw hope for that in the markets today. you were looking at the broad market, the s&p 500, you mentioned valuations being interesting here, what kind of time frame do you think an investor who gets involved in the market today needs to have as they get involved with the volatility we've seen? >> any time you're investing in the equity marketss you need to have at least a 10-year time who are riz son. owe horizon. lately people have been short-term focused. equities right now are a great buy. >> tom: what about gold, you mentioned that with the possibility of the fingerprint getting involved gold has been trending lower since hitting the high back in september. what do you expect out of gold and the gold etf's? >> when gold what we found is in a negative real interest rate environment, which means that you take interest rates minus inflation, and right now
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we're in a negative environment, gold tends to grow at over 20% a year. so as long as we're in that environment gold will be attractive, even in spite of this last correction, i think gold will do well especially considering that the fed will probably continue to ease and central banks around the world will continue to ease, which brings down dollars and other currencys and gold will benefit from that. >> tom: we didn't see gold benefit out of the concerns from europe two or three weeks ago, in fact we saw the dollar pop higher and gold sell off, is that a risk for owning goal these days? >> over a short-term base is the markets aren't going to do everything you expect them to do. gold is volatile, gold had a pretty good day the last couple days. so over a long period of time that's what we look at, we think gold will continue to move higher especially in light of the fed easing, but on any given day who knows what will happen. >> tom: i'll put david in the camp of optimist. do you own anything in the etf's we featured here tonight? >> we do. >> tom: david zier, with
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convergent wealth advisors. >> tom: j.p. morgan's multibillion-dollar trading loss on corporate bond derivatives is not a "too big to fail" scenario. that's the assessment of one of america's top banking regulators, comptroller of the currency thomas curry. he was on capitol hill today in front of the senate banking committee. >> j.p.m.c. has improved its capital, reserves and liquidity since the financial crisis, and those levels are sufficient to absorb this loss. it is also worth noting that the events at j.p.m.c. do not threaten the broader financial
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system, and the banks' effort to manage its positions is not creating an unusual risk for contagion. >> tom: curry blamed the bank's loss on weak risk management practices, in j.p. morgan's chief investment office. today's hearing comes as regulators work to finalize the volker rule, which would prevent banks from making risky bets for their own profits. but comptroller curry said it's not clear whether that rule would have prevented the loss. >> tom: president obama is in california tonight while mitt romney is in texas, both attending campaign fundraisers. we take a look at the key swing state of virginia, as we continue our look at the election, jobs and the economy tonight. the unemployment rate in virginia is just 5.6%, well below the national rate. that makes the state competitive for president obama, but as darren gersh reports, that is only half of the story. >> reporter: there are really two virginias. the north is barack obama's virginia; urban, diverse, high tech and highly educated.
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as home to the pentagon, virginia receives more federal spending than any other state, and three out of every four of those dollars ends up here, in northern virginia. that may explain why students in the area are willing to give the president the benefit of the doubt. >> given the state of the united states and the economy that he came in with, he's done a wonderful job so far. it wouldn't have been easy to turn this around no matter who was elected. >> reporter: but the president isn't taking votes here for granted. since he was elected, he's visited northern virginia community college campuses five times. and even here, with all the federal spending and an unemployment rate around 4%, his handling of the economy is a tough sell. >> everyone that i've known in my class that have graduated, they are working like unpaid internships, which is kind of like feeling like an indentured servant. >> reporter: the president may be popular here, but for students, the thrill is gone. >> now they are really reevaluating, i think, how they are going to vote in the fall,
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whether they are going to continue to participate. >> reporter: get away from a college campus and head further south and you'll find more long- time virginians, and they aren't happy with what sounds like presidential excuses on the economy. >> i think he thinks he's done a much better job than he has. >> reporter: in the other virginia, small town, southern virginia, federal spending and jobs are harder to come by. >> and they don't like government particularly. they don't think government helps them. they don't understand how dependent the state has been on government money. >> reporter: for mitt romney, that discontent with washington spending is an opportunity. so too, is the fear of losing federal spending. defense spending is critical to the virginia economy and the threat of automatic spending cuts scheduled for early next year could worry voters this fall. >> it might point to the failure of leadership on the part of the executive branch. it shouldn't have let this happen. and so you throw out the guy who
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let it happen, thinking the new guy may be better. >> reporter: the president will have a tough time keeping his job in november, if he can't keep at least one of virginia's economies happy. darren gersh, arlington, virginia. >> tom: our coverage of election 2012 continues tomorrow, with mitt romney's scorecard on jobs and the economy. >> tom: if you use linked-in, listen up. the social network for professionals says some of its user passwords were stolen. that comes after a hacker told a russian web forum he uploaded almost 6.5 million linked-in passwords. the company says if your password was one of the ones stolen, you won't be able to log
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in. instead, you'll get an email with instructions on how to reset your password. in the meantime, for another social networking company, a proposal from the nasdaq stock exchange for disgruntled investors. the nasdaq plans to compensate investors who lost money in its botched sale of facebook stock. the exchange is setting aside $40 million to cover losses from bad trades due to technical problems. nearly 14 million of that will be given as cash to brokerages. the rest will be credited in reduced trading costs for those firms. erika miller reports. >> reporter: the new nasdaq compensation plan addresses one of the issues weighing on facebook shares, but not all the concerns. >> at this point, we think a lot of the damage has been done in terms of thoughts about the company and the stock. >> reporter: although facebook shares rose today, they are still down 29% from their offering price. some investors aren't sure the nasdaq's compensation fund is deep enough. at $40 million, it's way below
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the $100 million or more that financial firms said they lost because of technical mishaps. the plan also does not placate investors who think nasdaq c.e.o. robert greifeld should resign. many blame him personally for the technical problems, since he had weeks to prepare for the high profile offering. but beyond the bungled i.p.o., facebook faces plenty of other challenges. the social media giant still faces lawsuits by investors who claim the company and its bankers mislead them about the firm's revenue outlook. so even at today's prices, it may not be wise to buy the shares. >> it's not only whether facebook can adequately monazite its user base in traditional internet and mobile contexts, but its also whether they want to the extent that the shareholder base might want. >> reporter: it doesn't help that facebook has been in a quiet period since launching the i.p.o. as a result, the shares are expected to remain under pressure until late july when
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second-quarter earnings come out. erika miller, "n.b.r.," new york. >> tom: facebook shares got a lift today, as did the rest of the market with some of the biggest gains in three months. buyers were encouraged by the possibility of more help for europe, as well as for the u.s. economy. the s&p 500 started strong, and even found more buyers in the last 20 minutes of the session. today's rally comes after the index had dropped to levels not seen since the first week of january. it's up 4.5% on the year now. the 287 point gain for the dow jones industrial average helped pull that index back into positive territory for the year. it's up just over 1.5% for 2012 now. volume increased a little today, 858 million shares on the big board; almost 1.8 billion on the nasdaq. we saw broad-based buying with all ten major stock sectors up by more than 1%, and the most economically-sensitive sectors led the way. the s&p energy sector jumped 3.1% percent as oil prices rallied more tha$1 per barrel. the financial sector rebounded
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3%, and industrials moved up 2.8%. leading the energy sector was beleaguered natural gas producer chesapeake energy. the company has been subject to controversy over dealings with its c.e.o. and how it will address mounting debt. the stock shot up more than 7% the company reportedly is in talks to raise more than $4 billion by selling most of its natural gas. natural gas pipeline company kinder morgan, meantime, fell almost 3.5%. the company declared a force majeure on part of a pipeline in north texas after a fire. the fire has been put out, and the gas is being diverted around the affected area. big bank stocks surged with talk of the possibility of more help for the economy coming. bank of america jumped 7.6%, citigroup up almost 5.5%, and home building stocks were red hot today thanks to a strong pulte homes jumped more than 7%. ryland group and m.d.c. holdings rebounded more than 5% each.
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housing optimism helped home depot too. shares up 3.4%, rising to their highest price since early may. but one housing wares industry was laid out, mattress makers and sellers. tempur-pedic lost almost half its value, falling 48.7%. it warned quarterly earnings would be about half what they were a year ago thanks to more competition. select comfort fell 20.5% in sympathy, but sealy dropped a more modest 5%, and retailer mattress firm was soft, down almost 21% after releasing disappointing first quarter results. investors were piling into records management firm iron mountain after its board okayed plans to convert to a real estate investment trust. that usually comes with higher dividends. the stock shot up 13.8% to its highest price of the year. it also announce it was raising its dividend. in our exchange traded fund market flash, all the actively traded e.t.f.'s were up by more than 2%.
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the financial and emerging market funds led the way. and that's tonight's market focus. >> tom: scott walker remains the governor of wisconsin tonight, fighting back a nasty recall effort sparked by a feud with state workers. labor groups across the u.s. watched the fight in wisconsin closely, and as diane eastabrook reports walker's win may have organized labor reevaluating future battle plans. >> reporter: a jubilant wisconsin governor scott walker
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greeted supporters last night after winning a bitter recall election. >> tonight we tell wisconsin, we tell our country, and we tell people all across the globe that voters really do want leaders who stand up and make tough decisions. >> reporter: in walker's case the tough decision was stripping public employees of most of their bargaining rights to help balance wisconsin's budget. the move infuriated labor groups and sparked the historic recall effort. university of illinois labor professor robert bruno thinks walker's victory could be a set- back for organized labor. >> the ability to successfully campaign or successfully move their candidates into office is critical to their ability to be able to promote their agenda or at least protect what is won through collective bargaining. >> reporter: unions need numbers to promote their causes and membership in the u.s. has been declining over the past few decades. today membership is strongest in the public sector.
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bruno says if organized labor wants to keep fighting for bargaining rights and better wages in state and national elections it will need to build alliances with other groups like the occupy wall street movement. >> it provides them with a way to frame issues and speak to people's sense of fairness, but it's never been historically easy for organized labor to make these kinds of alliances. >> reporter: the a.f.l.-c.i.o. said it hoped for a different outcome in wisconsin. but union president richard trumka said "it's time to work together to forge a new path forward." labor experts say walker's victory may encourage governor's in other state's to take on collective bargaining, but it could also discourage them from taking on an issue so politically charged. diane eastabrook "n.b.r.," chicago. >> tom: tomorrow on "n.b.r." phil angelides joins us, he's the former chairman of the financial crisis inquiry commission.
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we will talk about the state of banking rules and a new effort to have banks set aside even more money in case of problems. as government spending continues coming under pressure, money aimed at college campuses has been dropping nationwide. state funding for higher education fell by 7.6% last year according to a study by illinois state university. it marks the biggest drop of state funding for colleges in 50 years. increasingly, many state-funded schools are looking to the private sector for help. >> reporter: new mom alisa palmer in lubbock, texas is just the kind of patient who texas tech university wants to help with a smartphone app it has developed. the app is part of a larger trend of schools taking their research power and looking for corporations to help commercialize them. for texas tech, it's mommy meds app, helps expecting and new moms figure the impact of medicines on their babies. it's the brain child of dr. thomas hale. for 25 years he has researched drugs and published reference books for health care
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professions on drugs and mother's milk. now texas tech wants to release a consumer version for smart- phones. dr. tedd mitchell heads up texas tech's health sciences center. >> all of a sudden now you can reach these women in the world that they live in not in the world we live in. the world that medicine lives in very often we're cutting edge and medical technology but kind of archaic in our use of social media so its pulling us forward with that. >> what we're attempting to do is take our assets and match them with problems not just in the public sector but in the private sector so we can fulfill our mission, continue to fulfill our mission by advancing knowledge, transferring technology, and benefiting the public. >> reporter: companies like abbott labs have used university partnerships for years to help with research. it recently teamed up with the university of illinois to concentrate on nutrition's impact on the brain. these relations are based on common goals according to dr. robert miller of abbott nutrition.
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>> for us that's advancing product that brings science matters to the consumer. and for them it's really about advancing the science either through their students or through publications and grants. >> reporter: back at texas tech, it's still looking for a company to bring its mommy meds smartphone app to the market. that partner would get access to the mom's using the app, and the university would get money for a call center supporting the app, more research from dr. hale as well as general research, and chancellor kent hance says that helps improve the school for all students. >> as we do more research it provides us with better professors if they're on the leading edge of doing research in certain areas, they're certain to be able to teach that area. >> tom: chancellor hance also says while corporate research and commercialization partnerships help raise revenue for schools, they can't entirely offset the loss of state money. if you follow the stock market, you always hear about big
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numbers, but this number is bigger than any c.e.o. salary. today the number of internet addresses grew from 4.3 billion to 340 undecillion. that means 340 trillion trillion trillion. from your cell phone, to your printer, and computer, each web- enabled device needs its own net address. global overseer-- the internet society, says today's change ensures there's a home for every device. we have a home in cyberspace as well, it is nbr.com. that is the broadcast for this wednesday evening june 6. we want to remind you this is the time of year your public television station seeks your support, support that makes programs like "n.b.r." possible. goodnight everyone, we'll see you online at: www.nbr.com and back here tomorrow evening. "nightly business report" is brought to you by:
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